2022-06-22 08:22:33
Why have interest rates gone up? Describes ‘Bank of England’
Interest rates go up to help bring inflation back down. It will take time to work.
The cost of living has risen sharply over the last year. The speed of that increase is called the
rate of inflation.
It’s our job to keep the UK’s rate of inflation low. We have a target of 2%. It’s higher than that at the moment. That’s mainly because of two things:
• higher prices of goods coming from abroad
• large increases in the cost of energy
But there is also increasing pressure on prices from developments at home. These include:
• there are more job vacancies than there are people to fill them, which means employers are having to offer higher wages to attract job applicants
• businesses are charging more for their products
That’s why we’ve raised interest rates several times over the past few months.
Since December 2021, we’ve increased our key interest rate, Bank Rate, from 0.1% to 1.25%.
But it will take time to work. It’s likely that inflation will keep rising this year and start to come down next year. We expect it to be close to our 2% target in around two years.
6 views05:22
A
